With so many insurance options available, picking a product that meets your long-term needs and fits your current budget, can be difficult. This is where an insurance broker can come in. Using their insurance know-how, they can find a policy that best meets your needs for the most reasonable price.
A Life insurance broker is a professional who sells insurance, but they do not represent insurance companies. Instead, they represent you — the consumer — in the insurance-buying process. This is the biggest difference between insurance agents and insurance brokers. The former also sells insurance, but they represent insurance companies. Unlike an insurance agent, a broker’s primary duty is toward their client.
An insurance broker will walk you through all the available options so that you can pick the best product and will complete insurance sales for you. They will also help you obtain any discounts you are eligible for, ensuring you do not pay a penny more for coverage than you should.
Like other professionals, insurance brokers do not work for free — but you do not have to pay them directly. Instead, they are paid a broker fee by the insurance provider the client selects.
Keep on reading to find out what brokers do, the advantages of working with one, and how they get paid.
What do life insurance brokers do?
Insurance brokers sell insurance products. However, unlike insurance agents, insurance brokers represent consumers, not the providers they deal with. An insurance broker will take into consideration your personal and financial situation and then recommend a product that best meets your needs.
Insurance brokers must follow the industry guidelines set by their provincial insurance counsel and keep the best interest of their clients in mind when recommending solutions. In addition, insurance brokers need to continuously upgrade their skills, through education and training, to maintain their license and keep up with the insurance industry.
How do insurance brokers decide on the life insurance products they offer?
Just as travel agents have direct contracts with hotels, airlines, and other tourism services, an insurance broker will have a deep knowledge about insurance products and can make buying life insurance easier and simpler. When you get in touch with a life insurance broker, they will ask your questions to assess your insurance needs. They will examine the terms and conditions of different products, before recommending an insurance policy that gives you the best value for money.
What are the advantages of using an insurance broker?
Since an insurance broker does not represent any insurer, there are many benefits of working with them. These include:
- An insurance broker can shop around for the lowest rates, ensuring you get the best value for your money. Once a broker has accurately determined your unique needs, they will do all the legwork for you.
- Impartial recommendations
- Even though insurance brokers represent multiple insurers, they are not on their payroll, nor do they receive any additional incentive from them besides commission. Since they have no ties with any specific insurance carriers, brokers are under no pressure to sell the products of one provider over another. Also, insurance laws require them to always serve the best interest of their clients. When you contact a broker, you can rest assured that they will offer you impartial advice and help you find the best possible coverage at a reasonable price.
- Brokers have access to many insurance products
- Since brokers work with many providers, they have access to many different insurance products. Thus, they can ensure you do not buy the best insurance plan at the most competitive rate possible.
- As a client, you do not have to pay a broker directly for their services. An insurance broker receives a commission from the insurer from whom you buy your insurance policy. Because the commission is the same across providers, a broker has no financial incentive to convince you to pick one over another. Moreover, most brokers are open about these transactions and encourage their clients to ask them about their compensation.
How are insurance brokers paid?
When you buy an insurance policy from a broker, they earn money through a broker fee based on a percentage of your insurance policy. The commission is paid by the insurance provider picked by you, meaning it does not cost you extra to use the services of an insurance broker.
Different insurance carriers offer more or less the same commission to brokers on the same types of products. For example, whether a broker sells a whole life insurance product of company A or B, they will roughly make the same amount of money. So, there is no real financial incentive to sell you products of any specific company. The only thing your broker must focus on is what is best for you.
An insurance broker makes money by receiving a certain percentage of your annual premium as commission. This may vary from one province to another, based on each province’s laws. The professional advice that an insurance broker gives to you is free.They only make money when you buy a life insurance product through them — and then also it is not you, but the insurance company you selected, who compensates them for their services.
Insurance brokers hold licenses from the provinces in which they are practicing. Licensing requirements vary from province to province, but insurance brokers, regardless of their location, are legally obligated to put the interest of their clients first before those of the providers.
Since an insurance broker relies on repeat clients, it is in their best interest to find you the most appropriate insurance solution.Also, brokers receive a commission every time you renew your coverage. So, they have an additional ongoing financial incentive to keep their clients happy with the best possible coverage.
A broker acts as an intermediary between you and an insurance company. They have your best interest in mind and use their years of insurance knowledge and experience to find you a policy that meets your needs at an affordable price.You do not have to directly pay a broker; instead, they make money from commissions earned on sold policies.